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Financialization, Globalization and theManagement of Skilled Employees:Towards a Market-Based HRM Model inLarge Corporations in Francebjir_785 560..582

Florence Palpacuer, Amélie Seignour andCorinne Vercher

Abstract

The article analyses the transformation of HRM policies for skilled employeesin large corporations in France over the last decade in relation to changesoccurring in governance patterns and competitive strategies. First, we highlighta shift towards globalization and financialization in the strategic managementof large corporations in France, entailed by the diffusion of a shareholder formof capitalism in that country. Second, we characterize the market-based HRMmodel applied to skilled employees under these new strategic orientations andthe diversity of ways in which these transformations are perceived depending onemployees’ age and level of responsibility within the firm.

1. Introduction

While the late 1980s and early 1990s witnessed the rise of a literature seeinginvestments in human resources on the basis of broad employee training,employment stability and participative management as key sources of com-petitive advantage (Appelbaum and Batt 1994; Kochan and Osterman 1994),the late 1990s brought growing scepticism regarding the potential diffusion ofsuch participative management models in the new ‘high-performance’ work-place. In the United States, the continuous restructuring of large corpora-tions threw doubt on the capacity of the economy to continue to provide thetype of employment security historically developed in large corporations

Florence Palpacuer is at the Institute for Enterprise Management Sciences (ISEM), University ofMontpellier. Amélie Seignour is at the Academic Institute of Technology, University of Mont-pellier II. Corinne Vercher is at the Department of Economic and Social Administration,University of Montpellier III.

British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2010.00785.x49:3 September 2011 0007–1080 pp. 560–582

© Blackwell Publishing Ltd/London School of Economics 2010. Published by Blackwell Publishing Ltd,9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

(Capelli et al. 1997; Doeringer et al. 1991). Leading American thinkers onemployment and the labour market highlighted the rising pressures exertedby the investment community on large corporations in the direction ofcutting costs and improving profits, and expressed concern over the resultingadoption by large firms of HRM policies geared not only at downsizing, onthe basis of dismissals and subcontracting, but also at ‘treating labour muchlike their “just-in-time” procurement of other factors’ (Capelli et al. 1997: 7)through continuous hire and fire on the labour market. Announcing thedemise of American internal labour markets, Capelli strongly argued that‘career jobs [were] dead’ (Capelli 1999a) and companies were ‘managingwithout commitment’ (Capelli 2000) a ‘market-based employment relation-ship’ (Capelli 1995, 1999b).

On the basis of interviews conducted in 2004–2005 with HR managers andskilled employees — including both managers and professionals1 — primarilybelonging, or having recently belonged, to six prominent multinationals inFrance (see Appendix), we argue that such a market-based HRM model hasgained growing influence in large corporations in France (II), and identify arationale for promoting market-based management in the combined shifttowards ‘financialization’ and ‘globalization’ observable in corporate strate-gies in our sample (I). We conclude by highlighting the consequences of thesestrategic shifts in terms of greater insecurity and inequality of treatmentamong employees, signalling a reduced capacity of French capitalism to offeremployment protection and stability to core workers in large corporations.

2. The rise of global financialized corporations in French capitalism

During the 1980s and 1990s, developed countries have undergone a majorshift towards a new form of ‘patrimonial’ (Aglietta and Rébérioux 2004)or ‘shareholder’ (Williams 2000) capitalism. Characterized by the growingimportance of financial markets in the economy and the rise of institutionalinvestors as prominent shareholders of large corporations, the transforma-tion initiated in the United States during the 1980s, when institutional inves-tors had accumulated amounts of collective savings large enough to exercisesignificant buying power on financial markets (Lazonick and O’Sullivan2000). Spreading to European countries, such as France, over the followingdecades, these changes in the governance patterns of large corporations wereclosely intertwined to a shift towards global patterns of competition, asobserved in the six multinationals of our sample.

Diffusion of a Shareholder Value Ideology

Within the context of corporate ‘financialization’ where objectives to increaseshareholder returns have become dominant in the strategic managementof large corporations (Williams 2000), greater investor pressures havebeen passed onto top management through a variety of devices implicitly

Market-Based HRM Model in Large Corporations 561

© Blackwell Publishing Ltd/London School of Economics 2010.

promoting a transfer of risk from shareholders to the corporation and in turnfrom the firm to employees and suppliers, as observed in the United Statesduring the 1980s and 1990s. Lazonick and O’Sullivan (2000) argued thatmajor US corporations then shifted from a ‘retain and reinvest’ strategy,primarily using cash flows to sustain growth, to a strategy of ‘downsize anddistribute’ coupling work externalization and dismissals to greater cash flowdistribution to shareholders in the form of dividends and share buybacks.The average annual distribution rate of dividends increased from 42.9 to 58.5per cent between the 1970s and 1990s, while annual share buybacks over the1984–1996 period varied from 12 to 30 per cent of corporate profits(O’Sullivan 2000). While shareholder capitalism spread from the UnitedStates overseas during the 1990s, the magnitude and significance of thesechanges generated some disagreement in the ‘variety of capitalism’ literature.A uniform process of convergence towards shareholder capitalism could notbe observed across countries (Dore 2002; Dore et al. 1999; Jackson 2002).Hall and Soskice (2001), among others, acknowledged the rise of globalforces acting to spread market-oriented devices throughout developed econo-mies, but doubted their capacity to drive so-called ‘co-ordinated marketeconomies’ and other atypical forms of capitalism towards fully liberalizedmarket systems. Such was the case of France where the state played a strongco-ordinating role, notably in promoting the recovery and growth of thepostwar period based on large state-owned corporations, control over indus-trial credit, and the rise of a technocratic elite sustaining close ties betweenstate administration and the top management of large corporations (Hanckéet al. 2007). In the mid-1980s, under impetus to build up scale on the Euro-pean market, the state engaged in a series of reforms including the privati-zation of large firms and deregulation of financial markets (Djelic andZarlowski 2005; Hancké 2001). However, during this privatization wave as inthe following one of the mid-1990s, the French government organized theformation of what Morin (1996) called a ‘financial core system’ made ofintricate cross-shareholdings among major French corporations. Typically10 per cent of shares were sold to employees, 15 per cent to foreign investors,50 per cent to the public and 25 per cent to core shareholders (O’Sullivan2002). These systems of stable shareholding were established to protect cor-porations from foreign takeovers and gave de facto substantial autonomy toa managerial elite that escaped direct control from both the State and insti-tutional investors, producing a distinctive form of financialization in thatcountry (Schmidt 2003). Although the share of foreign investors in the equityof large corporations climbed from 10 per cent in 1985 to 35 per cent in 1997and 46 per cent in 2005, reaching higher levels in France than in otherEuropean countries such as Germany and the UK (O’Sullivan 2002; Poulain2006; Schmidt 2003), they rarely gained a majority position in the equitystructure of French corporations other than as a group collectively owning alarge aggregate of minority stakes. Corporations continued to be controlledby non-institutional core shareholders including families and managementallies, even though the average equity share of these non-institutional

562 British Journal of Industrial Relations


shareholders declined from 30 to 20 per cent over the 1990s (Morin 2000).Beyond France, a comparative study of ownership patterns in the 20 largestfood multinationals in Europe revealed comparable differences in the type ofshareholders exercising control over firms of various national origins (Pal-pacuer 2008). While the top 10 shareholders held an average position ofabout 40 per cent of total equity in both American and European firms,institutional investors predominated in American corporations where theycontrolled an average of 83 per cent of top 10 equity but owned only 41 percent of top 10 equity in European firms where committed shareholdersincluding families and strategic allies continued to hold dominant positions.Against this background of persisting national specificities, a convergenceprocess could be observed between the late 1990s and early 2000s when largeEuropean firms such as Danone, Nestlé and Unilever engaged in financial-ization strategies characterized by intensified communication with financialanalysts and investment managers, the launch of share buyback programs,rising dividends per share, stock-option policies for top executives and theuse of EVA-type of indicators to monitor performance and reward executives(Palpacuer 2008). Morin (2000) observed similar changes over the sameperiod in large corporations in France. Although the transformation was notuniform across corporations and few actually adopted the whole set of toolsassociated with financialization (Djelic and Zarlowski 2005), the magnitudeof change was undeniable, especially with regard to cash flow allocation. Thetop 40 corporations included in the primary index of the Paris stock exchange(CAC 40) distributed 60 per cent of cash flow to shareholders in the form ofdividends and share buybacks in 2007, while dividends alone increased from27 to 39 per cent between 1987 and 2007 (Quiry and Le Fur 2008).

Considering the persisting — if declining — ‘financial core’ in shareholdingstructures, the origin of such changes did not lie in direct pressures stemmingfrom major institutional shareholders. In a transformed French contextcharacterized by greater autonomy of top management, the strategic shifttowards financialization was rather deliberately initiated by corporationsthat simultaneously engaged in global strategies on products markets withthe primary aim to build and maintain leadership positions on a transna-tional rather than domestic level. The largest French firms pursued rapidinternational growth in the 1990s, generating an intense activity of mergersand acquisitions by which firms built up their market base in businesseswhere they could aim for global leadership (Goyer 2001; Picard 2003). Acommonly held view among observers of these changes consisted in seeingcorporate efforts to meet financial markets’ demands as a way to boost stockprice in order to finance international acquisitions either by public shareexchanges or debt — provided that the debt/equity ratio measuring a firm’sborrowing capacity was calculated on the basis of the market rather thanaccounting value of equity (Commissariat Général du Plan 1999; Djelic andZarlowski 2005; Picard 2003). Some emphasized that firms had chosenthis form of ‘financial dependency’, playing by the rules of institutionalshareholders to boost share prices, in order to avoid falling into a form of



‘industrial dependency’, that is being acquired by global competitors, in acontext where the partial dismantling of cross-shareholding arrangementsmade firms more vulnerable to multiplying hostile takeover bids on the Frenchmarket of the late 1990s (Commissariat Général du Plan 1999; Montagne andSauviat 2001). Others underlined that by making such a choice, top executiveshad formed a new alliance with key agents on financial markets, thus breakingup the old Fordist alliance historically established with employees inside thefirm to form a new power sphere at the global level, increasingly disconnectedfrom employment and production patterns at the local level (Boyer 2000, 2005;Palpacuer et al. 2007). By intensifying communication with the financialcommunity, top managers — whose financial interests became aligned withthe equity return objectives of shareholders, thanks to stock-option distribu-tion reaching particularly high levels in France (Goyer 2001; Schmidt 2003) —promoted a strategic model based on global specialization in core businessesas so-called ‘pure players’, investments in branding, marketing, R&D andproduct proliferation, and disinvestment and/or systematic cost-reduction inmanufacturing and basic service processing, as holding superior capacities forscale economies and shareholder value delivery. Investors’ and top managers’rationales thus became mutually reinforcing, a global strategy on productmarkets both necessitating strong stock prices and being expected to producesuperior shareholder returns (Batsch, 1998; Morin 2000).

Financialization and Globalization in Corporate Strategies

A shift towards globalization and financialization could be observed in thesix multinationals of our sample although at various times, to differentdegrees and under distinct forms across the various cases. Table 1 summa-rizes the main characteristics of ownership structures, the symbolic momentsignalling a reorientation towards global financialized strategies — associ-ated in all cases with the launch of share buyback programs and risingdividends per share over the following years — and the main changes under-taken by these corporations on product markets. Our objective in selectingthese firms was to explore transformations occurring in a variety of sectorsincluding traditional and high tech industries as well as services, and in firmsof diverse nationalities including mainly France (AXA, Alcatel, Danone,Carrefour) but also other European countries (Nestlé) and the United States(IBM), all holding leadership positions in French and global markets.

The merger of AXA with its major French competitor UAP in 1996actually symbolized what Morin (1998) called the ‘grande rupture’ in aninfluential report prepared for the French government on the rise of foreigninstitutional investors and shift towards a more financialized form of capi-talism in the national economy. AXA and UAP, respectively, occupied stra-tegic positions in the intricate web of cross-shareholdings established in the1980s. The newly merged firm thus potentially became a central actor for theco-ordination and regulation of national economic activities. Nevertheless,Claude Bébéar, then at the head of the corporation, deliberately chose to sell



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stakes in a number of major French firms such as Crédit National (12.4 percent), Schneider (7.1 per cent) and Suez (6 per cent), and to retain onlyshareholdings considered as strategic as BNP (12 per cent) and Paribas (9.76per cent) while placing other shareholdings in a newly formed investmentportfolio to be managed according to Anglo-Saxon norms for financialreturns. Under this new configuration, AXA took a strategic turn to becomea world leader in assets management and financial protection. Foreign inves-tors bought blocks of shares previously held by allied corporations, thusincreasing their participation in the merged company up to 37 per cent in1998. Core shareholding — including insider control and interlockingarrangements — subsequently declined from 36.6 per cent to 11 per centbetween 1998 and 2008 while the share of foreign institutional investorsreached 45 per cent.

Alcatel — then Alcatel-Alsthom — also occupied a key position in theFrench ‘financial core system’ through cross-shareholdings with AGF,Société Générale, UAP, and Générale des Eaux, among major French firms.Its ‘financial core’ significantly shrank during the mid-1990s down to 20 percent in 1998 while foreign institutional investors collectively acquired 40 percent of shares. Core shareholding further declined to 11 per cent in 2005. Thearrival of Serge Tchuruk at the head of the firm in 1995 gave the signal of astrategic transformation of this conglomerate privatized during the first waveof the 1980s and still holding close ties to the State. Having split fromAlsthom in 1998 and sold its stake in 2001, Tchuruk aimed to refocus Alcatelon the telecom industry through aggressive divestments and focused interna-tional growth in three core businesses (mobile, fix and private communica-tion), while launching a massive plan to externalize manufacturing. A signalof close interdependence between corporate strategy and shareholding wasgiven in September 1998 when Alcatel’s stock price declined by 38 per centovernight in response to a profit warning made by the top management.Despite the following launch of a share buyback program, it took over a yearfor the firm to regain its pre-crisis stock price.

The shift towards financialization and globalization strategies was alsoassociated with the arrival of a new CEO at Danone and Nestlé, respectively,in 1996, when Franck Riboud succeeded his father at the head of the Frenchfood firm, and during the following year at its Swiss competitor. AntoineRiboud had built a multi-domestic, diversified food multinational on thebasis of acquisitions typically financed by issuing new shares, that is with fewif any concerns for shareholder value (Pérez 2004). His son chose to tackledemanding contemporary challenges: ‘I had an ambition of globalization(. . .). EVA was very fashionable at that time, so we did a value creationexercise. We questioned the quality of our brands, all classic levers for valuecreation. We decided where we had to internationalize in order to generategrowth’.2 The product/market portfolio of the corporation was refocused onthree global businesses including beverages, dairy products, and biscuits(sold to Kraft Food in 2007). The influence of financial markets on corporatestrategy manifested itself most strikingly in November 2000 when Danone’s



stock price sharply declined following Riboud’s public announcement of hisinterest in acquiring Quaker Oats through stock exchanges. Analysts andfund managers feared a decline in the rate of financial return that Danonehad started delivering in recent years, and Riboud had to give up the deal.Due to its high proportion of floating shares (85 per cent) of which anestimated 47 per cent were owned by foreign institutional investors in 2007,Danone remained vulnerable to takeovers.

Nestlé stayed more diversified following Peter Brabeck’s arrival at the headof the firm in 1997, but its dozen activities were progressively reorganized intosix major product segments in order to provide shareholders with more‘visibility’ on the firm’s profit generating potential. Nestlé started increasingdividends per share in 1998 and launched a share buyback program during thefollowing year. Although the firm retained a highly dispersed ownershipstructure, thus avoiding the direct influence of any major investor, Swissshareholders receded from about 50 per cent to nearly 30 per cent of ownershipwhile US investors climbed from nearly 10 per cent to 33 per cent of sharesbetween 1999 and 2007. During a conference call in February 2001, CFOMario Corti gave explanations for the 28 per cent increase in dividenddistribution decided by the firm despite a lower growth in profits per share in2000: ‘It is a sign of our confidence in our ability to deliver in the future . . . Wewant to bring [the pay-out ratio] more in line with global competitors in orderto preserve the firm’s financial strength to conclude even very large transac-tions such as the acquisition of Ralston Purina’. Made in 2000, this acquisitiongave Nestlé a prominent position on the US pet food market in one of the mainbusiness areas that the corporation had targeted for global growth.

Carrefour became number two on the global retail market following itsmerger with French competitor Promodes in 1999. This major scale shift wasarranged by families holding major positions in the ownership of both cor-porations. The deal placed the Haley family, previously owning Promodes, atthe top of the new shareholding structure while Daniel Bernard, the CEO ofCarrefour, continued to head the merged corporation. The new Carrefourbuilt up significant leverage in both country scope and retail format, and themerger came in a period of sustained international acquisitions by which thefirm reached a rate of foreign to total revenue of 51.8 per cent in 2007.Despite decelerating sales growth from the mid-1990s on, the firm managedto increase return on invested equity and maintained dividend distribution atabout 40 per cent of profits (Baud and Durand 2008). A tight coupling ofinternational expansion to financial market performance was demonstratedin 2005 when Daniel Bernard had to leave following a profit warning made inthe fall of 2004. The financial orientation of the firm was reinforced with theexit of the Haley family and entry of the Arnault Group — a legal entityestablished by Bernard Arnault, majority owner of the French luxury groupLVMH — together with the US investment fund Colony Capital as majorshareholders in 2007.

In the last firm of our sample, IBM, American institutional investorsoccupied most of the top 10 ownership positions. Its strategic turn was one of



many undertaken by American corporations to restore profitability andincrease shareholder value from the 1980s on (Capelli 1999b). It coincidedwith the arrival in 1993 of Lou Gestner, the first CEO not recruited frominternal ranks in the firm’s history, who ushered in stringent financial controland undertook to redeploy the core business of the corporation, historicallybuilt in computer development and manufacturing, towards global businessservices. The transformation unfolded through the following decade up tothe sale of IBM’s PC division in 2005, following a series of important acqui-sitions in consulting (PricewaterhouseCoopers) and software (Rational Soft-ware Corp.) in the early 2000s. From 2000 to 2007, IBM redistributed 78 percent of net income to shareholders through stock repurchases (63 per cent)and dividend distribution (15 per cent) (Lazonick 2008).

3. Towards a market-based HRM model

How did such changes towards financialization and globalization in corpo-rate strategies affect human resources management? In large US corpora-tions, work communities were disassembled and the market — characterizedby depersonalized, bilateral short-term exchanges — became a dominantco-ordinating mechanism and underlying rationale for HRM policies. Whilesuch transition and its origin in the financialization of corporations and theeconomy have been well established in the United States and the UK (Deakinet al. 2003; Gospel and Pendleton 2005; Jacoby 2005), the effects of changingpatterns of capitalism on employment relations in European countriesremained more controversial. Conway et al. (2008) summarized this debateby opposing a ‘constraint hypothesis’, stemming from research linking finan-cial pressures to lower job tenure, cost cutting and adversarial worker-management relations (Deakin et al. 2002, 2003), to a ‘partnershiphypothesis’ according to which financialization was compatible with, if notconducive to, greater investment in training, higher wage levels, workers’commitment and a long-term horizon in worker-management relations, asobserved in case studies in the UK (Deakin et al. 2006), Germany (Jacksonet al. 2005), and in a survey in France (Perraudin et al. 2008). Conway et al.’s(2008) survey analysis further confirmed the existence of some correlationbetween a corporate status as listed company and resort to training, team-work, and performance-based pay in France, thus bringing support to the‘partnership hypothesis’ in that country. Likewise, Hancké (2001) made thepoint that greater financialization in French capitalism did not come atthe expense of workers insofar as a strong legal system continued to offeremployment protection and geared worker management relations towards along-term perspective (also see Hall 2007).

Indeed, within the French institutional context, and since the 1973 nationallabour law, employers must provide a legally recognized reason, either ‘eco-nomic’ or ‘personal’, for dismissing workers. The former relates to a firm’semployment policy — including downsizing — while the latter pertains to an



employee’s faulty behaviour or insufficient performance. When economicdismissals reach a threshold of 10 within a 30-day period, they fall under a‘collective’ — as opposed to ‘individual’ — dismissal procedure furtherrequiring the employer to inform the local union and labour department ofdismissal plans, to give priority to displaced workers in subsequent rehiring,and to demonstrate that no job alternatives could be offered them elsewherein the company — worldwide in a multinational. Surprisingly, althoughdownsizing plans regularly made the headlines of the business press, ‘eco-nomic’ dismissals declined from 409,000 in 1995 to nearly 255,000 in 2005while ‘personal’ dismissals grew from nearly 350,000 in 1995 to 585,000 in2005, to become prominent in the country with an increase from 46 to 70 percent of total dismissals.3

‘Personal’ dismissals, if still requiring a legal reason, fall outside the tradi-tional scope of labour unions intervention so that their statistical increaseplaces a growing number of employees in situations where they are isolatedvis-à-vis employers and can only resort to court — the so-called Conseil desPrud’hommes formed of elected representatives of employees and employers— to contest dismissal conditions. As a consequence of such change in firms’dismissal practices, the French institutional context could be considered tohave become less protective of employees than was the case when economicdismissals predominated in the country. A 2001 analysis of national statisticsfurther indicated that dismissals for ‘personal’ reasons were more frequent inthe high-tech sector and in large establishments having adopted objective-based management and performance appraisal systems, that is in some of thehigher-skilled, most sophisticated workplaces in the country. Among dis-placed workers, ‘personal’ dismissals were more frequently encountered forskilled employees — managers and engineers — than for other employmentcategories, respectively, in 28.8 versus 12.3 per cent of cases of unemploymentregistration (Pignoni and Zouary 2003).

Studies testing the ‘partnership hypothesis’ by focusing on training expen-ditures, wage levels and teamwork might thus have overlooked the significantif barely visible rise of ‘personal’ dismissals, gaining media attention only inrare cases when dozens of workers succeeded in contesting the legal reasonsgiven for their dismissal at a given firm, as experienced by Alcatel in 2004(Seuret 2006). Consequently, we chose to focus on issues of job stability andthe nature of employees’ attachment to the firm in investigating the ways inwhich these ‘personal’ dismissals were used and embedded in broader HRMsystems for skilled employees in the six multinationals of our sample — withcomplementary interviews in smaller, mainly high tech multinationals (seeappendix). The results presented below focus on cross-case similarities ratherthan differences — for reasons including confidentiality — and on the overallpatterns that could be seen as unfolding, at various times and to differentdegrees, within the firms studied. In such patterns, we did not seek to sys-tematically differentiate the respective influences of financialization and glo-balization insofar as these were closely intertwined in corporate strategies.Following Capelli (1999b) and others, we adopted a ‘configurational’



approach seeing corporate choices on labour, product and financial marketsas interrelated and not necessarily lending themselves to measuring the influ-ence of an isolated variable over another (Miller and Mintzberg 1983).Beyond corporate discourses, special attention was devoted to the ways inwhich skilled employees experienced their relationship to the corporation,career path and dismissal for ‘personal’ reason. While our case studies wereby definition limited in scope, they allowed us to identify the intricate andfirm-specific ways in which the influence of financialization and globalizationunfolded in the management of skilled employees and contributed to greateremployee turnover, enhanced precariousness of employment at global andlocal levels and a normalization of dismissals for ‘personal’ reasons, thusreducing employment protection and stability for core workers within thefirms studied.

Opening Internal Labour Markets

The shift towards global financialized strategies acted as a major impetus toopen internal labour markets, by requiring a new set of managerial skills thatcorporations could obtain on the basis of external hiring rather than internalpromotion: ‘It’s been a very tricky moment, with the exit of many historicalfigures . . . and at the same time, the building of a new [X] refocused on threebusinesses at a rapid pace on international markets . . . and the entry of newmanagers inside the firm’ recalled a former HR Director (Employee 6). ‘Wesaid “we need people that we can send abroad on new operations, and peoplethat can bring in their experience of other multinationals.” So we startedrecruiting managers with a very different profile than those we had. . . . Thatwas a cultural revolution’ (Employee 6). With unequal speed and intensity,the HRM policies of the firms studied were evolving towards an ‘up or out’system where managers had to leave after a few years if they didn’t climb uphierarchical ladders: ‘The logic is, on the one hand, there are too many peopleat any given time. On the other hand, they say “he’s 40, he’s good at his job.For a future job, there are already 10 people, and may be 2 are not good, 7are very good, and the 8th is very very good. And well, there’s that youngerfellow who just came in and who’s doing well.” So it’s better to deal with theissue now than to give him another job and postpone the problem at a highercost in the future’ (Employee 17).

Rather than internal promotion, financial compensation based on indi-vidualized, performance-oriented schemes played a central role in themarket-oriented relationship that companies aimed to develop with employ-ees. Several HR Directors underlined the American origin of such shift:‘Compensation. That’s the only mission for the HR department at corporatelevel. It became more important since we moved headquarter to the US. . . .In the US they do no training, no recruitment . . . that’s all externalized. Theyfocus on compensation’ (HR Director). ‘We’ve put in place a number of HRtools and we did it in a radical way: very high bonuses compared to the basesalary, stock-option policy . . . well, an international executive management



Administrateur utilisateur

Administrateur utilisateur

policy’ (HR Director, Employee 6). Combining carrot and stick, perfor-mance assessment systems were used not only to reward but also to sanction:‘We try to stimulate individual performance contribution so we say to thebest people: “you’ll have a higher salary and you’ll have a strongerperformance-based bonus”, and for those at the bottom of the scale there areconsequences in financial terms, for career perspectives, etc.’ (HR Director).‘The pressure on achieving results is increasingly strong and people feel thatthey are put into question very, very quickly. Today, a guy who doesn’t meethis objectives gets fired, there’s no questioning of whether that can beexplained by the local context, the context of the brand, etc.’ (HR Director,Employee 6).

Using the Fisher Exact test of independence, we identified significant dif-ferences in the ways in which skilled employees of various ages experiencedthis shift towards a more contractual employment relationship. We used anempirically derived distinction between ‘seniors’ defined as aged 40 or more,and ‘juniors’ younger than 40 (see Table 2). When talking about past workexperience, seniors emphasized the role of internal careers based on employ-ment stability and competencies development policies: ‘It was the big firm of[the former CEO] before, the mobility was part of his famous “Xgrams”.Well, they have disappeared, these Xgrams’ (Employee 19). ‘At [thecompany] you could go to [a subsidiary] and work in construction, then to[another subsidiary] in food catering’ (Employee 13). Senior employees dem-onstrated a strong attachment to values of solidarity that a strong socialpolicy had helped to promote within their company: ‘There’s always been avery important social policy, including profit sharing. It’s a company thatredistributed a lot to its staff, and well, nowadays that kind of thing is gone’(Employee 5). ‘I came in 1979, when [the former CEO] was putting in placehis social and economic policy. . . . There was a will to manage the companyin such a way that we wouldn’t develop economic projects without looking attheir social aspects’ (Employee 6).

The distance expressed by junior employees stood in sharp contrast withseniors’ nostalgia of a firm-based community. Juniors had difficulties adher-ing to a corporate culture that they perceived as highly normative: ‘They donot aim to train people. They aim to format you, but they do not train you’(Employee 9). ‘There’s a model of the perfect employee for each positionaccording to various variables: capacity to meet objectives, project manage-ment skills, personal development, etc.’ (Employee 3). ‘There’s a manipula-tive dimension in these corporations, there’s compensation, there’s a lot ofthings, the social life, etc., that’s also a form of control’ (Employee 8).

These juniors were distancing themselves from the firm in such a way thatthe trust component experienced by seniors was almost non-existent: ‘We’reno longer on the more or less open paternalism telling you that without theenterprise, you’re nothing. You make friends in the company, but it all blowsout at the first financial difficulties. . . .When you use short-term employ-ment as a management policy, you shouldn’t be surprised that employeeloyalty declines’ (Employee 10). ‘I consider that my level of loyalty towards



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my employer stops at the level of my employer’s loyalty towards me. So,nowadays, weak’ (Employee 8). Having experienced a dismissal played a rolein the formation of such distanced attitudes: ‘So yes, [the dismissal] changedmy way of seeing things because maybe I was a very idealistic person, enthu-siastic. I’m not saying that I won’t be again, but I know that enterprises obeya financial logic. I knew it a little bit deep inside but it had not come out sodirectly’ (Employee 10). ‘Juniors have no illusions and we go little by littletowards a contractual relation, knowing that we will never be able to reducework to a monetary transaction, we will continue to develop something butthere will be a part of ourselves that will be out of the job’ (Employee 8).Consequently, juniors were attempting to better balance their professionaland personal life: ‘Some people only have work in their life. If that goeswrong, it can affect their morale’ (Employee 12). ‘It’s the end of this totallyunbalanced approach, this view that top management jobs are a privilege sothat they should be deserved by working like a slave’ (Employee 22). ‘Even aconsulting firm like [X], where I worked and God knows that they’re nothippies, is starting to give sabbatical leaves to consultants. They don’t do itout of kindness but because they know that today it’s become more and morenecessary just to retain the guys’ (Employee 22).

Distinct Patterns of Precariousness at Global and Local Levels

Although the market became a strong feature of employment patterns in thefirms studied, it was put to work in very different ways depending on employ-ees’ level of responsibility. Corporations continued to actively manage thecareer of a small elite of ‘high potentials’ (HPs) (Falcoz 2004) trained toimplement global financialized strategies on the basis of accelerated jobrotations across countries and business units within the firm. ‘HPs’ typicallystayed for an average of 2–3 years in a given position. They benefited fromdedicated compensation schemes including stock options and acceleratedcompensation growth, and followed specific training programs such as mul-tifunctional, multinational teamwork exercises aimed at developing theircapacity to identify sources for financial performance improvement undertight time constraints at a given site or subsidiary. However, HPs did notbenefit from any explicit or implicit promise of employment security. If onefailed to meet work objectives in a given project, he or she could lose the HPlabel without notice or be asked to leave the company altogether. ‘It’s a littlebit, you know, like the church choosing its bishops: you build up a list andyou take out names. You put some people under close scrutiny by movingthem every two years and all of a sudden you take them out because here itdidn’t work, there they’ve shown their limits, etc.’ (Employee 10).

At the local level, skilled employees were to take responsibility for man-aging their own career under market-oriented conditions. Intranet job fairshad been set up at a number of firms in order to match internal job demandand supply: ‘You arrive at [X], I will give you access to all the informationand processes that will allow you to work on your own career in our



company. It’s up to you to use these information and tools’ (HR Director).‘On the intranet, it’s the seller [the hierarchy] and the buyer [the employee]that take over at the expense of the HR function’ (Employee 8).

The segmentation of HRM between global and local levels was imple-mented in various ways in the firms studied, from a deliberately dual systemto a more nuanced mix of high potential and traditional career systems. Ittranslated into distinct work experiences and career opportunities for ‘global’(n = 8) versus ‘local’ (n = 14) employees (Table 2). The former played a keyrole in running globalization and financialization strategies: ‘When I arrivedat [X] . . . I started looking at the numbers and I said “Considering ratiotargets for the firm, we need 300 000 euros of sales per employee, so we havean excess of 47 employees.” That’s how it goes’ (Employee 7). They wereselective and exercised some bargaining power with employers: ‘They gaveme an overview of the company. I liked the people. I liked the size a lot:700–800 people worldwide, large enough and still at a human size. And theyoffered me an interesting challenge. So I agreed to join them’ (Employee 21).At the same time, global managers were expected to maintain unfailing workperformance and quickly seize career opportunities inside or outside thecorporation: ‘To wait for propositions would be perceived as a weak capacityto project oneself in the future and that would be a risky behaviour’(Employee 22).

Local skilled employees felt downgraded to a subordinate role. Theirdiscourses converged to portray changes towards new forms of control anddecision making that they perceived as more remote, depersonalized, and lesspredictable than in the past: ‘We didn’t know where [the top management]was heading, they would never say clearly “that’s where we’re going”.Departments like mine were to disappear from one day to the next and wedidn’t know it’ (Employee 1). ‘The bosses were always changing, a lot ofmobility, people arrived that we didn’t know, assigned to be our chiefs, anda year later they were gone’ (Employee 12). Consequently, people found itmore difficult to understand the logic and orientation of their own work:‘Nowadays, managers are asked to work and they do not even understandwhy. . . . You get orders, they tell you to go right, then they tell you to goleft, you’re asked to work without knowing where you’re going’ (Employee19).

Local employees perceived that equal chances and attention were not givento all in the corporation: ‘There’s a strong management policy for executives,but not for skilled employees’ (Employee 19). ‘There’s no training for skilledemployees, I asked for a training program but I never got it, there was notime. They put you in the pot and it’s “find yourself the way out before it’stoo hot!” (Employee 6). This population expressed more critical opinionsthan its global counterpart regarding corporate focus on short-term financialreturns: ‘The pressure became very strong on all the department. We workedin open space, everyday we looked at sales data, almost hour after hour at thetime of a new product launch, that was nonsense’ (Employee 3). ‘We getto report every week. That’s nonsense. It becomes completely crazy. The



problem is, reporting is not used as a management tool as it used to be, it’s aform of control and it becomes a weapon’ (Employee 19). Such pressuresgave rise to a pattern of ‘forced co-operation’ (Coutrot 1998), that isco-operation induced by competitive forces rather than social cohesion:‘Some of our objectives push us to be the best of the work unit, to playagainst the others. That’s not the idea I had of teamwork. I though it was theresult of the unit that counted’ (Employee 12).

Normalization and Individualization of Dismissal Practices

In the firms studied, accelerated mobility and the use of individual perfor-mance appraisal systems produced situations where dismissals for a ‘per-sonal’ reason became a routine part of managers and HR staff activity: ‘It’svery common. The more you move up the hierarchy, the more common it is.It’s “the” mode of dismissal for executives, in France. It’s an individualiza-tion of dismissals, the Anglo-Saxon model that becomes dominant, that’sclear’ (HR Director). Significant differences could be observed betweenglobal and local employees regarding the ways in which they dealt with‘personal’ dismissals (see Table 2). Global employees legitimated these dis-missals as a management tool: ‘In many cases, it’s a way to act on the factthat there are people who after 5–6 years in a company are no longer moti-vated, they no longer have energy. They know the company, they’re nolonger expecting much from it, they would like to slow down but slowingdown means being at odds with other employees. And the extra-cost of anexperienced person vis-à-vis a younger candidate who will stay in the ranks,well, it’s there. So generally we offer dismissal for a personal reason to thesepersons’ (HR Manager, Employee 8). Global managers were themselvesexposed to this type of dismissal and able to negotiate a financial packagewhen leaving the company — in French legal terms, a ‘transaction’ by whichcurrent and future sources of legal conflicts would be extinguished. In thecases studied, the negotiation was generally straightforward: ‘I quicklyunderstood and I told them “Listen, we’re not going to fall out, you’ll give meright away what I want in a deal”. My exit happened as simply as that’(Employee 7). ‘They told me “Well, would you be ready to agree to leave?”My agreement depended on how we would spell out the dismissal, that is,how many zeros came after the comma. I got no reasons to complain on thatside’ (Employee 8). This form of dismissal was perceived as a contractualarrangement: ‘It’s a divorce by mutual consent’ (Employee 8). ‘I’d say thatnowadays the dismissal for personal reason offers a way to quickly get a bigsum of money when you’re young’ (Employee 8).

By contrast, ‘personal’ dismissals produced a feeling of exclusion for localemployees: ‘At a given time I wasn’t in the good books and then I think that[my manager] gave the signal for my exit’ (Employee 2). ‘There’s a logic ofprogrammed, institutionalized exclusion in a dismissal for personal reason’(Employee 9). Some local managers perceived that such dismissal followed an‘eviction process’, i.e. a demoralization campaign aimed at pushing them out



of their job (Boltanski 1982): ‘They hope to discourage people, to wear themout’ (Employee 12). ‘They sap the individual until he loses ground, until hesays “after all, I’m no longer good for the company, that’s true, you’re right,I no longer have my place with you” (Employee 1). Other local employeesstressed the brutality of their dismissal announcement: ‘When I came backfrom vacation, my Director called and said that he would come to the store.. . . We went to my office and he showed me a sheet: immediate dismissal. Hetold me to take my things and give him the keys of my office. I said: “Wait!I don’t understand! It’s not possible!” (Employee 4). ‘On the very morning ofmy dismissal, my boss gave me some extra-work and when she asked me tocome to her office, I was going to tell her “Here is what I’ve done.” That’swhen she told me “Here’s your letter. Put the date and sign, thanks.” It wasa summons letter for my dismissal. For me, the world was falling apart!’(Employee 9). Local employees also felt that the legal reason for their dis-missal was imposed on them: ‘That’s one thing I told my Director and theHR manager. I told them: “I would have preferred that you adopt thelanguage of executives with me. That is, tell me the real cause for my dis-missal, instead of inventing a false reason” (Employee 19). Others insisted ontheir work performance: ‘My ratings were excellent over the last five years. Iwas well ahead of objectives that were assigned to me’ (Employee 3). ‘Onlegal aspects, one cannot say that I did not give satisfaction. It’s not possible.They came to get me at the law company where I worked. They knew me,they knew my way of working’ (Employee 1). Transactions offered to localemployees were typically equivalent to the legal indemnities that theiremployer would have to pay under the French law. Most refused such trans-action and chose to sue their employer, contesting the legal reason for theirdismissal and seeking a higher financial compensation. The choice to go tocourt was not exclusively based on financial consideration. It conveyed asymbolic demand for some form of justice: ‘I didn’t want to drop the casebecause . . . I wanted them to be punished; I wanted a trace to remain some-where. It’s too easy to dismiss people like this!’ (Employee 11). ‘They offeredme a transaction while telling me “We have nothing against you but we nolonger want you here. We offer a 12 months salary as indemnity” But whatthey did, it’s unacceptable, that’s why I went to court’ (Employee 3). Beyonddismissal practices, local employees expressed criticisms regarding the shift incorporate values underlying the broader phenomena of corporate financial-ization and market-oriented HRM policies. Local seniors faced particularlystrong difficulties in finding a new job and dealing with the psychologicalconsequences of their dismissal after years of work conditions based onloyalty and internal promotion within the firm.

Dismissals for ‘personal’ reason had thus become a management toolallowing firms to individualize employment termination and introduce someflexibility in their relationship to core workers who benefited from standardforms of employment previously associated with stability. The magnitude ofthe phenomena varied depending on the firms studied. While some firms inour sample had attracted the attention of the business press by systematizing



‘personal’ dismissals on a large scale at various moments of the 1990s andearly 2000s, others were making a softer use of this legal form of dismissaland retained stronger features of internal labour markets such as broad-based career systems. Even these firms, however, had engaged in internaltransformations geared towards a market-oriented HRM.

Recent national debates and changes in employment legislation have beengoing in the same direction. A breach in the legal protection of workers wasintroduced in 2005 by allowing firms of 20 or less employees to dismiss peoplerecruited over the previous two years without providing a legal justificationfor doing so — although this possibility was withdrawn in 2008 by virtue ofits incompatibility with ILO Convention 158 (Pélissier et al. 2008: 329). Anattempt to suppress requirements to justify dismissals for employees aged lessthan 25 was abandoned in 2006 following a strong protest movement fromstudents and labour unions. In 2007, the government proposed to suppressthe existing distinction between temporary and standard contracts whileremoving some of the constraints associated with economic dismissals. In2008, a law on the ‘modernization of the labour contract’ gave employers andemployees the possibility to end the employment relationship on the basis ofa ‘common agreement’, that is without resorting to a dismissal procedure.The conception of employment relations underlying such legislative changesclearly leaned towards bilateral, reversible contracts rather than collectivedynamics characterized by unequal power among parties and justifying legalemployee protection.

4. Conclusion

The diffusion of a shareholder-oriented form of capitalism from theUnited States overseas since the 1990s has taken the form, in France, of ashareholding system in which non institutional investors typically retainedmajor ownership positions while foreign institutional investors acquiredlarge aggregates of minority shareholding in large corporations. Gainingautonomy from a traditionally strong state while escaping direct control — ifnot more diffuse influence — from institutional shareholders, the top man-agement of these corporations deliberately took a turn towards financializa-tion in order to obtain the financial means to proceed with globalizationstrategies, while such strategies were in turn conveyed to investors as superiorsources of shareholder value creation. A first contribution of this article hasthus been to show, on the basis of six case studies of multinationals, howfinancialization and globalization had become intertwined in the strategies oflarge corporations unfolding in a national context that continued to exhibitstrong specificities.

On the employment side, while a market-oriented HRM system has beenshown to become prominent in the United States, the consequences of finan-cialization for employment relations in France were considered to remainfavourable to core workers insofar as strong employment protection



continued to be offered by the legislation. Against this background, a secondcontribution of our article has been to uncover the ways in which corpora-tions have introduced flexibility for core workers along a market-orientedmodel promoting greater employee turnover, a carrot and stick motivationsystem combining performance-based pay with employment termination forinsufficient performance, and an individualization and normalization of dis-missal practices. The latter was obtained by substituting for economicdismissals — both individual and collective — the use of dismissals for‘personal’ reasons that became dominant in France between the mid-1990sand the mid-2000s. The distinction legally established between dismissalsjustified by the firm’s economic policy and those motivated by employees’behaviour thus became increasingly blurred in a corporate context charac-terized by individualized HRM systems. Growing short-term financial pres-sures and precariousness in job positions have been passed onto skilledemployees as financialization and globalization strategies unfolded over thelast decade, with distinct effects on the nature of their attachment to thecorporation depending on their age and experience — seniors feeling a muchstronger disruption in their work identity than did juniors — and embeddedin distinct career management and dismissal patterns at global and locallevels in the corporation. Acknowledging such an ideological shift towards amarket-oriented conception of employment, recent legislative reforms intro-duced possibilities for employers to face fewer constraints when dismissingworkers, thus contributing to the rise of ‘social insecurity’ pointed out by anumber of observers of the French workplace in recent years (Castel 2006;Supiot, 2003).

As a way to conclude, we wish to emphasize the issue of sustainability raisedby current corporate orientations towards financialization, globalization anda market-driven HRM that have proved destructive of collective dynamicsand values — even though, paradoxically, the discourse on corporate values isstronger than ever — due to growing individual exposure to risk and perfor-mance pressures together with increased inequality of treatment of employees.Interviews with managers and engineers revealed a dehumanizing effect ofsuch corporate practices stemming from remote depersonalized decisionmaking guided by the obsessive search for financial returns. If corporations areto be conceived as social communities, then the sustainability of managementsystems enhancing rivalry and uncertainty within the firm at the expense of asense of solidarity and equity remains an open question, as does the role ofskilled employees themselves in perpetuating these evolutions.

Final version accepted on 16 January 2010.

Acknowledgements

The authors wish to thank two anonymous referees as well as Simon Deakinfor detailed and useful guidance in the revision process of this article.



Notes

1. The notion of skilled employees used in this article refers to the French-specificemployment category of ‘cadres’, historically formed in the 1930s by the alliance ofengineers and managers to provide a countervailing influence to the rise of bluecollar workers’ organizing, and subsequently leading to the formation of distinctlabour unions such as the Confédération Générale des Cadres (see Boltanski 1982).The notion of ‘cadres’ later became institutionalized in collective bargainingsystems as a broad employee category encompassing both engineers and managers.

2. Personal interview, 1 October 2001.3. Ministère de l’emploi, de la cohésion sociale et du logement, Direction de

l’Animation de la Recherche, des Etudes et de la Statistique (DARES), unpub-lished data. The results presented in this article concerning patterns of use ofdismissals for personal reason in multinationals are based on an unpublishedreport prepared for DARES by the authors. Also see Pignoni and Zouary (2003),Lagarenne and Le Roux (2006) and Bobbio (2008).

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Methodological Appendix

Our method for data collection on HRM policies and skilled employees’experiences relied on semi-structured interviews conducted in 2004–2005 with10 HR directors and managers and 22 skilled employees, mostly belonging orhaving belonged to the six multinationals of our sample. Employees sharedthe characteristic of having left their last company on the basis of a dismissalfor ‘personal’ reason during the 3 years preceding their interview. They wereaged between 29 and 57, mainly male (15) and working as engineers, layers ormanagers (see Table A1). Interviews were recorded and discourses wereanalysed using a thematic content approach.

TABLE A1Characteristics of Interviewees (n = 22)

Employees Sector Job Gender Age

Employee 1 Food Brand director Female 57Employee 2 Food Quality engineer Male 32Employee 3 Food Marketing product head Female 32Employee 4 Retail Store director Male 43Employee 5 Retail Store area manager Male 48Employee 6 Food HR director Male 56Employee 7 Aeronautic HR director Male 38Employee 8 Consulting HR manager Male 31Employee 9 Construction Lawyer Male 30Employee 10 Consulting HR manager Male 29Employee 11 New technologies Electronic engineer Male 52Employee 12 New technologies Electronic engineer Male 30Employee 13 Services HR Director Male 50Employee 14 New technologies Electronic engineer Male 30Employee 15 New technologies Electronic engineer Male 39Employee 16 Food Communication manager Male 57Employee 17 Food Sales manager Male 43Employee 18 Tourism Lawyer Female 33Employee 19 Insurance Project Head Female 49Employee 20 Insurance Project Head Female 34Employee 21 Transportation Business Unit Director Male 41Employee 22 Banking Distribution manager Male 37

